The Finance Act (No.2) 2017 received Royal Assent on 16th November. It confirms the heralded, but long delayed, increase in the limit on the amount of social investment tax relief (SITR) qualifying investment that an eligible social enterprise can receive. The limit has increased from about £275k in any three year period to a lifetime limit of £1.5m. A number of other SITR eligibility rules have also changed, some of which are set out below.
Organisations which have been waiting to raise up to the higher limit will now be able to seek HMRC pre-qualification assurance for such investments. Organisations can continue to raise non-SITR qualifying investment over the existing limits.
Social enterprise conditions
Where an investor already holds shares or bonds issued by the social enterprise, the investor will be ineligible to receive SITR unless such shares or bonds are either permitted subscriber shares or a 'risk finance investment' in respect of which a compliance statement for EIS, SEIS or SITR has been issued.
The investment must be made before 6 April 2021 rather than by 6 April 2019.
What is social investment tax relief?
SITR was introduced to encourage new investment by individuals into community interest companies (CICs), community benefit societies, charities and approved social impact bond contractors. It is designed to help such organisations raise social investment to develop or expand their social mission or to help them find new ways of tackling societal or environmental issues.
SITR entitles investors to claim 30% tax relief on the amount invested in the tax year of the investment. The maximum annual investment which qualifies for SITR is capped at £1m per investor.
The main benefits to a social enterprise receiving SITR qualifying investment are:
For specialist social investment legal support, please contact Richard Hiscoke on 0370 194 8904.